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Thursday, October 26, 2017

Daily update 10/26 Is This The Source Of America's Growing Discord?

It was a draw.

SPX opened higher this morning, but couldn't make anymore upside progress.  The breadth was barely positive at the end of the day.  New highs were up a bit to 181.  New lows dropped to 80, but remain very elevated.  Volume was above average again indicating plenty of participation.  How do we classify the day?  SPX ended the day higher, but below the open.  Some would say the bulls won and some would say the bears did.  I think we have more of a two sided market then we have been having for quite some time.  How long that lasts though is anybody's guess. 

The futures are just hanging around below the 20 SMA.  They have not confirmed a break yet.  That often means they won't.  On an hourly chart it is easy to see they have had falling resistance levels over the last couple of days.  It started at 2569 then moved down to 2566.  Today it was 2564.  If they can get above 2564 and stay there tomorrow we could resume the rally. 

The green count picked up today, but remains below 50.  The red count barely changed at all.  Last night I mentioned the bulls sometimes show up when the lines come together like they did yesterday.  While they showed up today, they did not give us a clear sign they are ready to resume the upside.

The intermediate lines have now crossed negative along with the short term lines.  The long term lines appear to have peaked.  Buying pressure has waned a bit, but selling pressure is still muted.

There were a lot of tech earnings after the close.  QQQ is up considerably so they must have been well received.  So far the futures do not seem to be impressed.  However, I noticed that happening one time before and by morning the futures were up significantly.  I don't know if that will repeat this time, but it could.  It will be interesting to see if investors buy or sell the strength in the morning assuming QQQ gaps up considerably. 

The dollar index closed strongly and above the key 94 level.  If it can stay there it could be on its way higher.  Interest rates appear to be breaking out on the upside as well.  If those moves keep going interest rate sensitive stocks will probably come under some pressure.  If rates rise too quickly it will likely be quite negative for stocks.  A slow rise might be ok.

The ECB cut their QE program in half starting Jan. as expected.  The BOJ is scheduled to have a monetary policy announcement on the 30th.  I heard some talk recently about them cutting back on their buying program.  It is important to note there will be much less liquidity around next year.  Stocks might continue higher, but there could be more volatility. 

I am curious to see how tomorrow plays out.  The futures are waiting for a catalyst to head higher or lower.  Yesterday saw intense intraday selling pressure unlike anything we have seen this year.  There was enough selling into strength today to keep the bulls at bay.  All this is leaving us in limbo just a bit.  Maybe the market is getting ready for a pullback, but it isn't clear that is the case yet.  The bears are going to have to show more strength in the days ahead to make that happen.

I think this article expresses my thoughts on social media much better then I could ever write them.  Is This The Source Of America's Growing Discord? 


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.